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GSA fears loss of its biggest customer: Defense

By Dawn S. Onley

Aug 23, 2004

GSA and DOD have launched the Get it Right program to correct federal contracting problems, Sandra Bates says.

Rick Steele

The military would face limitations on how it buys goods and services from General Services Administration contracts under two provisions in the National Defense Authorization Act for 2005. Several officials said the moves imperil GSA's Federal Technology Service, which does three-quarters of its business with the Defense Department.

Sections 803 and 815 of HR 4200 would prohibit Defense agencies from procuring items from non-DOD contract vehicles if the vehicle includes a service charge of more than 1 percent. FTS, from which Defense agencies purchase products and services, charges a 2 percent to 3 percent service fee.

The measures, which Congress passed to address problems in federal procurement, would negatively affect both military and civilian agencies, a GSA official said. The authorization bill must be passed by both houses of Congress before it would go to President Bush to be signed into law.

The provisions also would set a $100,000 cap on Defense agencies' purchases through any GSA Client Support Center without first consulting with the DOD inspector general.

For orders over $100,000, the IG must review the policies, procedures and internal controls of the Client Support Center, along with auditors from GSA.

Contracting problems have plagued both GSA and DOD this year, most recently with the misuse of contracting vehicles in Iraq. Earlier this year, GSA's inspector general found FTS offices across the country guilty of violating procurement regulations. The IG said the offices used IT contracts inappropriately to buy goods and services outside of the scope of the contracts.

In July, GSA and DOD launched the Get it Right program as a way to correct the contracting problems, said FTS commissioner Sandra Bates. GSA managers, under Get it Right, will review and supervise the use of GSA contracting vehicles.

Bates said GSA is concerned that, if made law, the bill's provisions would have a ripple effect throughout the federal government.

The contracting limits would hamper warfighters and would also force vendors to raise their prices, Bates said, adding that GSA would stand to lose the bulk of its business.

'DOD is collectively our largest customer, and if they were prohibited from doing business with us, it would have a negative impact,' she said. 'And I think that would then roll over into the non-DOD customers because suddenly everything begins to unravel.'

Bates said that FTS would almost certainly have to shrink its operations if it could no longer provide services to DOD. 'I believe this would result in a higher cost to the government because we would not be leveraging the government's buying power anymore, but rather having single procurements.'

Bates said she and other representatives from GSA, along with Deidre Lee, director of Defense procurement and acquisition policy, have met with representatives of the Senate and House Armed Services committees.

Lee was unavailable last week for comment.

'It's up to us to talk to the staff and to show them by our actions what we're doing to address their concerns,' Bates said.

Calls for interviews with staffers working on the Senate and House Armed Services Committee were not returned.

But David Marin, a spokesman for the House Government Reform Committee, said Rep. Tom Davis (R-Va.), chairman of the committee, is strongly opposed to the proposals laid out in the authorization act.

'If DOD were to be prohibited from purchasing from these contracts, FTS would be eviscerated and likely shut down,' Marin said.

Marin said Section 803 would give the DOD inspector general the ability to mandate policies, procedures and internal controls for how GSA's Client Support Centers operate. 'Because DOD is by far the largest GSA client, GSA would be required to implement any demands made by the DOD IG in order to be certified,' he said.

That percentage would not even cover the administrative expenses of the contracting vehicle, Marin said, adding that DOD accounts for 76 percent of all orders placed under FTS.

Earlier this year, Lee said Defense officials were drafting a rule that would require an internal review before using another agency's contracting vehicle.